How newly minted companies, copycat websites cashed in on PPP
A suspicious online university whose curriculum appears to be cut and pasted from a European school, two companies with nearly identical websites and two others with practically no internet presence — all five of these businesses are connected to the same Texas man.
And all five received Paycheck Protection Program loans for a total of at least $3.65 million. But should they have?
These companies are among more than 75 businesses that received loans of at least $150,000 from the coronavirus small business relief program but don’t appear to have existed before this spring or to have met other eligibility criteria for the program, which was administered by the U.S. Small Business Administration. Collectively, the questionable loans, which are publicly reported as a range of values rather than a specific amount, totaled somewhere between $20 million and $50 million.
No state produced more businesses flagged in the analysis than Florida, which accounted for more than one out of every four businesses that fit the pattern.
The questionable loans were flagged in a joint investigation by Miami Herald/McClatchy and
Some of the companies that cashed in on PPP loans seem to have come into existence right before the emergency loan program started. Others double dipped. A look at how vulnerabilities may have been exploited.
the Anti-Corruption Data Collective, a nonprofit group of journalists and data scientists researching corruption. A number of the businesses have owners with troubled financial pasts, including some with multiple personal bankruptcies and others with convictions for fraud.
Former federal agents and prosecutors who spoke with the Herald/ McClatchy expressed alarm at the findings and the lax fraud controls in the program.
“This is disturbing on all levels,” said Ben Curtis, a partner in the Miami office of McDermott Will & Emery and the former assistant chief of the Criminal Division Fraud Section at the U.S. Department of Justice. “You have a federal government that is somehow comfortable releasing massive amounts of money to the general public with very little diligence on the front end. And because they structure this program like a glorified honor system, you have an almost salivating group of bad actors ready to fleece it from inception.”
Prosecutors have brought charges against more than 20 businesses for fraud under the CARES Act, which authorized the loan program, and a recent report by the House Committee on Oversight suggested that there could have been billions of dollars worth of PPP fraud. Rep. James Clyburn, a Democrat from South Carolina, called on the inspectors general of the U.S. Treasury Department and SBA to investigate the program.
Experts say the size and speed of coronavirus relief programs such as PPP made them vulnerable.
“This is going to be the biggest fraud in government history, the magnitude of which we will not know for many years to come,” said Vic Hartman, a former FBI agent and author of a 2019 book about fraud based on lessons from his career.
The PPP was designed to help existing businesses stay afloat — and keep employees on the payroll — during the pandemicrelated downturn. It was not meant to provide seed money for new businesses. Under the rules of the program, businesses were required to have been “in operation on Feb. 15, 2020,” but vetting of potential borrowers was left to banks that issued the loans. They in turn were required only to take borrowers at their word for much of the required information.
Loan amounts, for example, were based on self-reported data on a company’s payroll in the previous year, with the maximum loan size capped at $10 million. The loans, which carry a 1% interest rate, are forgiven if used for payroll and other approved expenses within 24 weeks after the award was given and borrowers can avoid making any repayment at all if they submit their paperwork on time.
The analysis matched data made publicly available about more than 600,000 businesses that received PPP loans greater than $150,000 with corporate registration data from the open source database OpenCorporates, which draws its data from state corporation records across the country. Newly created businesses flagged in the analysis were then manually reviewed by researchers and reporters to determine which businesses appeared to be in potential violation of the program’s rules.
The SBA didn’t release the names of businesses that got loans below $150,000, and the corporate registration data didn’t include information for 11 states and contained incomplete information for several others, meaning that the analysis is likely a significant undercount of the true number of newly created businesses that received PPP funds and other businesses that fraudulently obtained loans through the program.
The SBA provided a short statement to the Herald and declined to answer detailed questions about the findings and businesses flagged in the analysis.
“The SBA does not comment on individual borrowers. Evidence of waste, fraud, and abuse with any of SBA’s loan programs is not tolerated and should be reported. ... The SBA successfully distributed
5.21 million loans and $525 billion to small businesses in an unprecedented amount of time, through the Paycheck Payment Program,” the SBA said, misstating the name of the Paycheck Protection Program.
STRING OF SUITS
Two newly created Florida businesses that got PPP loans have virtually no footprint — physical or digital — but appear to be connected to the same Florida family. Buccaneer Technologies received a PPP loan between $350,000 and $1 million on May 11, three days after the business was registered with the Florida secretary of state. Sonata Technologies, meanwhile, was approved for a PPP loan of between $1 million and $2 million on May 26, eight days after the business was registered with the state.
Buccaneer Technologies, which indicated that it is an advertising agency, listed a virtual office in Miami as its business address, while Sonata Technologies listed a virtual office in Aventura as its business address. But both companies list the same home address in Apopka for their managing members. Emmet Bowens is listed as the CEO of Buccaneer Technologies, while Equansha Bowens is listed as the manager for Sonata Technologies. Property records show that Emmet Bowens owns the Apopka home. The relationship between Emmet and Equansha is unclear.
Emmet Bowens faced two lawsuits in 2019 after defaulting on payments for a 2019 Ford F-150 and a used 2015 Mercedes CClass. The suit to recover the F-150 is ongoing, while the suit to recover the Mercedes was voluntarily dismissed in early August, within months of the PPP loan approval.
Bowens and his wife, Taquanda, have also been involved in an ongoing suit brought by a mortgage company that says the couple owe more than $190,000 from the previous owner’s unpaid mortgage and fees for the Apopka house that they bought in foreclosure in 2017. The couple have disputed the legitimacy of the claim.
In 2011, Emmet Bowens, under the name Emmitt Pascal Bowens, filed for bankruptcy in Tennessee, seeking to discharge more than $290,000 in debt, but his bankruptcy request was denied after it was challenged by the auto finance company Ally because the company said Bowens had “transferred, removed, concealed or has permitted the same to be done,” to a Chevrolet Avalanche he had defaulted on that the finance company had tried to repossess earlier in court.
Emmet and Equansha Bowens did not respond to requests for comment to numerous telephone numbers and email addresses associated with them or through the lawyer Emmet and Taquanda have retained to represent them in the mortgage dispute.
A different business flagged in the analysis appears to have gotten two PPP loans, which is prohibited by the program rules.
Power1 Integrated was awarded a loan valued between $150,000 to $350,000 from Itria Ventures LLC on June 29 and then awarded a second
PPP loan in the same range from Zions Bank the following day. Neither bank responded to a request for comment. And both loans were reported as active.
CALIFORNIA OFFICE?
The company was registered in California on May 14, listing a shared office space in Beverly Hills as its business address. Employees of the shared space said that the company is not a registered user of the location and that it has received mail addressed to the business that it returned to sender.
Power1 Integrated indicated in its filing with the state that it had been incorporated by Donald Walter Winston and that its agent was Langford & Hadley, headquartered at a different virtual office. A business listing the name Donald Winston and the same address as Power1 Integrated was also awarded a PPP loan of between $150,000 to $350,000 on May 21. There’s no record of a company by that name registered with the state, and the virtual office where Langford & Hadley is supposedly headquartered had no record of the company.
There is a Facebook profile for a Donald W. Winston, who is supposedly a tax attorney in Los Angeles, but the California Bar doesn’t list any lawyer by that name and the account’s profile picture is actually a stock photo of a “man in front of a book.” The Herald/McClatchy reached out to an email address associated with a business seemingly related to Power1 Integrated and got no response.
In Texas, a network of five companies that received between $3.65 million and $8.7 million in PPP funds likewise appears suspicious.
Joseph Sinoj, the Texas man connecting all of them, said he is a controlling manager for the companies but not the beneficial owner.
The websites for two of the companies, MK Analytics and Sanbi Solutions, were essentially identical to the website for SanJose Systems, a Texas technology company that lists Sinoj as its CEO. SanJose Systems did not receive a PPP loan.
When asked about the similarities, Sinoj replied that the websites might be out of date.
“All the websites may not be updated most frequently,” he said.
After the Herald/ McClatchy contacted Sinoj, the websites for MK Analytics and Sanbi Solutions were altered. The MK Analytics website currently says “Planned maintenance in progress.”
Sunny Matthew, a vice president for business intelligence with Sanbi Solutions, said that Sanbi’s website had been out of date.
He said that the company, “widely engaged in the business of Enterprise resource planning, ERP systems Integrations, Performance management solutions and Business intelligence solution,” had been in existence for nearly two years and that its relationship with MK Analytics “is thru supplier/ vendor category.”
All three sites previously touted a contract SanJose Systems signed with the Texas Department of Information Resources.
The contract effectively added SanJose Systems to the state’s preferred vendor list, but state records show that the company’s only customer was a nonprofit university, AnnJose University, registered in Texas by a man named Joseph Varghese who also registered SanJose Systems.
Sinoj declined to answer questions about AnnJose University and its purchases from SanJose Systems, saying he had a meeting to attend.
The website for AnnJose University lists a shared office space in New Orleans as the physical address for the online university, which does not appear to be accredited, is not licensed or registered in the state of Louisiana and was granted a religious exemption from oversight by the state of Texas. The university purports to offer degrees in theology, but much of the content on the site appears to be copied from Domuni Universitas, an online theological university founded in France, which has no connection to AnnJose. One page on the AnnJose site even includes a reference to Domuni Universitas.
“It’s a pretty blatant copy,” said Carly Wood, head of the English department at Domuni.
She said the European online university, which has roughly 3,000 students, was not aware of the AnnJose site until being contacted by a reporter from the Herald/ McClatchy. She said the university is taking steps to try to get the AnnJose site taken down.
“You just wonder what the intentions are,” Wood said. “Are they trying to get money out of it?”
AnnJose University obtained a PPP loan valued at between $150,000 and $350,000 on May 10, indicating that it provided environmental consulting services.
The other companies, which got loans in June, all indicated that they provided custom computer programming services.
Three of the four companies, MK Analytics, Sanbi Solutions and KMS Traders Group LLC, all got loans through Radius Bank, while KJ Traders and Consultants LLC got a loan through Celtic Bank.
All four of the software companies listed Wyoming addresses, and the companies were registered there in recent months. MK Analytics, Sanbi Solutions and KJ Traders and Consultants were all registered in May, weeks before obtaining PPP loans, and months after the Feb. 15 deadline by which companies needed to be in operation. KMS Traders Group, which received the largest PPP loan of all of the companies, between $2 to $5 million, was registered six days after it was awarded the loan and the company indicated that the loan would save 97 jobs.
In response to a list of questions sent to Sinoj, Mani Kandathil, the chief operating officer for KMS Traders Group, said that the information provided by the company to the SBA was accurate and that despite the July registration in Wyoming, the business had been in operation since December 2018.
“The Wyoming registration documents shows the entity classification adopted according to an update in operating agreement of the Entity by the business and its date,” Kandathil said in an email. “The business was in operation on Feb 15th 2020 and business started on Dec 2018.”
Kandathil declined to say where the business has been in operation during that time.
The website for the company was registered on Aug. 25, 2020, according to internet registration data, and appears to have gone live after the Herald/ McClatchy began reaching out with questions about the business.
[After publication, Nidhila K, a representative for KJ Traders and Consultants, reached out to say that the company did not, in fact, receive a PPP loan, despite records suggesting otherwise. “The company has no idea who is behind this mess. The company has not received any PPP loan from SBA.”]
PROSECUTORS HAVE BROUGHT CHARGES AGAINST MORE THAN 20 BUSINESSES FOR FRAUD UNDER THE CARES ACT, WHICH AUTHORIZED THE LOAN PROGRAM.
‘PAY AND CHASE’
Despite these examples, experts believe that most of the PPP money went to deserving businesses that were kept afloat by the funds.
“The majority of businesses are legit and took advantage of the program the way it was supposed to be taken advantage of. But there are bad apples out there,” said Jeffrey Scheer, a business lawyer at Bond, Schoeneck and King.
And even if some of the money is later determined to have gone to ineligible borrowers, that isn’t necessarily a design flaw with the program.
Hartman, the former FBI agent, said he suspects that the program’s architects likely understood that some degree of fraud would be inevitable with the rapid rollout, but that they would be able to reel back some of the fraudulently obtained money after it went out.
“It’s called pay and chase,” Hartman said. “You pay and then you chase all the fraudsters.”
Other fraud experts say the amount of money obtained by ineligible borrowers might wind up being worth it in the broader calculation of the economic recovery.
“It sounds weird for an anti-fraud guy to say this, but that doesn’t mean the program was misguided,” said John Warren, general counsel for the Association of Certified Fraud Examiners. “I’m sure there are thousands of businesses that were saved because of it.”